Security Token

What Is a Security Token?

A security token is a type of digital asset that represents ownership or investment in a real-world asset, such as shares in a company, real estate, or bonds. These tokens are regulated and subject to the same laws as traditional securities (like stocks or bonds), ensuring they offer investors legal protections.

How It Works

• Representation of Assets: Security tokens are typically issued on a blockchain and can represent ownership in physical or financial assets. For example, a token could represent a share in a company or a piece of real estate.
• Regulated: Unlike cryptocurrencies like Bitcoin, which are considered commodities, security tokens are subject to securities regulations. This means they must comply with laws concerning trading, ownership, and disclosure.

Example

Imagine a real estate development project issuing security tokens to raise funds. Investors buy these tokens and, in return, get fractional ownership of the property. If the property increases in value, the value of their tokens also rises, and they might receive dividends or a share of the profits.

The Sum Up

In short, security tokens are digital versions of traditional securities, offering real-world asset ownership with the benefits of blockchain technology.